Memo: In Good Fashion

The merits of fashion retail have never been logical but for the best operators, there is a way to make sense of the chaos.

Likeability, brand equity, and appeal can shift in an instant. But there are predictors of success and failure. Historical benchmarks have long been available to serve as guideposts for the savviest retailers looking to navigate tumultuous times of the present. Manufacturers have thrived during war, recession, protest, and pandemic, and only the poorer performers cited external factors as cause for concern.

A common misconception in the digitally native vertical brand industry is that the previous year of the pandemic is thwarting the growth of fashion retailers, harming sales projections, stifling growth, or shuttering doors. The hard data contends there’s more to the story. Of the current top 100 fastest-growing direct-to-consumer brands tracked by 2PM, 40 are fashion retailers, while four are in the top 10. This has been a breakout year for fashion.

Updated for the week of 2/8/2021

A number of modern brands deepened community and developed foundations for explosive growth over the last 12 months: Parade, Rowing Blazers, Madhappy, Aime Leon Dore, Tracksmith, Buck Mason, Gymshark, and Monica & Andy are but a few. For the retailers who struggled through the last year, this memo can serve as a helpful reset.

The average American buys a piece of clothing every five days. A study of historical crises will show that our behaviors do not slow to halt during moments of distress. Instead, they change; we allocate our spend differently. We limit our purchases to “affordable pleasures” or we shift to differing styles that represent the feel of the moment in question. We are wired to buy things to wear and we do so frequently, even the most frugal of us. What changes is how we express our individuality in evolving times.

Consider Ralph Lauren’s rise in the late 1970s and early 1980s despite a catastrophic American recession. A 1990 article in Utah’s 171-year-old daily paper Deseret News began:

If the 1980s were a movie – and the metaphor is almost unavoidable given actor/president Ronald Reagan’s domination of the decade – the credit lines would have to include costumes by Ralph Lauren. [1]

The designer identified and marched forward on a new approach to an established idea, the article explains: The New Traditionalism or “the baby boom’s kitschification of the middle age.” Lauren wasn’t the first; an even greater example of this strategy is 1947’s launch of then-obscure designer Christian Dior’s first line.

In 1947, my first collection was successful beyond my wildest dreams. 

After departing the army in 1942, the 37-year-old Dior joined the Lucien Lelong fashion house alongside a gentleman named Pierre Balmain, the house’s other primary designer. Drio, along with Lelong and Balmain, labored to maintain France’s fashion industry throughout World War II. Five years later, Dior launched his design house’s debut fragrance. The bottled Miss Dior perfume was a tribute to his sister Catherine who was liberated from a concentration camp just two years prior. Inspired by the country’s Belle Époque period of the late 1800s, Dior preceded Ralph Lauren in a period-driven return to tradition. It was his admiration of that period, 50 years on, that influenced a femininity in his design that would eventually take the contemporary fashion world by storm.

Fashion has never been logical. Sometimes, timing is as much a factor as anything else. For Dior, timing couldn’t have been better. Fast Company’s Liz Segran recently covered COVID-19’s effect on fashion trends. She cited Dior’s prescient strategy and brilliant timing:

During World War II, for instance, women wore jeans and overalls as they took over men’s jobs. Then, in 1947, Christian Dior unveiled his debut collection, which featured figure-hugging jackets, fitted waists, and A-line skirts. It was a radically feminine look that repudiated the utilitarian, masculinized garments of the previous years—and that was the point. Around the world, women swooned over this style, dubbed the “New Look,” which became a dominant fashion trend of the late 1940s and early 1950s. [2]

This next part is prescient. In that Fast Company report, Segran went on to explain the dynamic of women wearing men’s workwear, including overalls and denim, during the war. She cited author Kimberly Chrisman-Campbell explaining how, even after the war concluded and the pendulum swung to a radically feminine look, the fashion trends of the war persisted:

After a crisis, there is a backlash, but there is also a lasting effect. Both of these can be true at the same time.

The war years normalized a new era for womenswear, including pants and garments that were never before considered customary. This sheds light on the potential post-pandemic behaviors of today.

The retail industry has suffered from foundational issues. The reliance on debt leverage to fund growth and inventory has contributed to legacy companies filing for bankruptcy. Of these, J.Crew, Brooks Brothers, JCPenney, and Neiman Marcus are three of many.

However, like womenswear post-World War II, the reset is not as clear as once thought. America’s current comfort in casual wear is likely to persist in the home and places of work for years to come. Consumers did buy clothes to wear during the pandemic despite the remote work trend, stay-at-home orders, and distance learning. The clothes or the messages by the retailers were just unique to the time.

Good Fashion, Bad Everything

This year, traditional retailers like VF Corporation’s The North Face grew in prominence through careful merchandising, streetwear adoption, and savvy collaborations (See: Gucci). Lululemon’s stock is trading near all-time highs. And Gucci has become the “preferred” luxury brand of Generation Z.

While many brands are suffering, and some have had to take drastic measures like permanently closing stores, other brands like Dior or Louis Vuitton have been performing well, indicating that the pandemic is hitting brands with pre-existing conditions harder. [3]

Direct brands like Parade climbed from relative obscurity to $10 million in annual revenue. Rowing Blazers, a traditional menswear retailer, showed up on everything from NBA stars to Princess Diana in Netflix’s The Crown. Madhappy used savvy merchandising, a persisting message, and their partnership with LVMH to earn Lebron James’ attention in the NBA bubble. The brand is now one of the most coveted streetwear brands born in the last five years. Gymshark accepted its first funding, landing at a valuation north of $1 billion. And Tracksmith, the amateur running brand, finally caught the attention of the mainstream after years of quiet growth. It is now featured across the airwaves thanks to the success of their succinct and aspirational advertising strategy.

Like Ralph Lauren’s rise to prominence during an economic recession and political and cultural reset, and Christian Dior’s establishing of a new post-war tone for American women that flew in the face of other trends, the brands that succeeded during our most recent global crisis did so because they were properly equipped. In each case, they all share (1) smart marketing, (2) savvy merchandising, (3) a messaging strategy that cuts through the worried noise, and most importantly, (4) appreciation for the history of the industry.

For the brands that struggle to regain their footing, at least one of the above four are missing. The pandemic has served as a mirror for modern and traditional retailers alike. Walk into a J.Crew and you may feel soulless. Walk into a Rimowa store and you will feel the sense of New Traditionalism that catapulted Dior and Ralph Lauren to generational success. An over-reliance on physical distribution, pay-per-click advertising, traditional merchandising cycles, academic marketing strategies, and stale interpretations of customer profiles are the preexisting conditions that culminated with the current state of retail distress.

It doesn’t have to be this way. Study the best practices of the past. There will always be momentum shifts, forth and back, over time. The brands that survive are studied in sociology, customer understanding, brand history, communication, and the experiences that elevate a product into a moment. These brands capture more than eyeballs; they capture imagination. It’s the one constant of an enduring brand over decades of ebbs and flows.

By Web Smith | Editor: Hilary Milnes

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Member Brief: Clubhouse Commerce

The true measure of retail’s direction is the attention focused on the technologies that provide the most serendipity. Physical retail will always have its place and online retail will likely never be the majority of all sales velocity. But consider this question:

If you were starting a brand right now, where would you go for serendipity?

This member brief is designed exclusively for Executive Members, to make membership easy, you can click below and gain access to hundreds of reports, our DTC Power List, and other tools to help you make high level decisions.

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Member Practical: ButcherBox’s Growth Arbitrage

Between 2010 and 2016, a number of CPG retailers and digitally native vertical brands came of age with the help of a licensed gym movement that shaped a decade of influencers in health, nutrition, and fitness. That list includes fixtures like NoBull, FITAID, Rogue, Mizzen + Main, Zevia, Siete Foods, and RXBar. Built within or on the periphery of the CrossFit movement, these brands have gone on to amass mainstream followings and notable physical distribution. A few are now household names. One quieter brand has made an impact on a market long overdue with modern challengers.

In 2015, ButcherBox founder and CEO Mike Salguero began a hunt for high-quality, grass-fed beef. His wife Karlene, diagnosed with an autoimmune issue, was told to follow a diet of grass-fed animal protein. But after an exhaustive search in the Boston area, Salguero found limited options. Rather than give up, he sought out a direct source, connecting with a New York-based farmer.

ButcherBox launched after Salguero recognized a market for claims-based meat sold from farm to customers online. The company, which now employs 160 people, aims to help boost farmers’ businesses while expanding access to best-in-class, grass-fed meats.

Today, ButcherBox is one standout in a class of DTC brands working the mechanisms of influencer marketing to rally customers around a common goal, in this case, to bring high-quality produce to direct-to-consumer channels. In 2020, the company saw revenue increase by 110%, with growth driven by effective influencer work. Over the past five years, ButcherBox built a business carried by a coordinated community of influencer partnerships.

Early days: Partnering with influencers

In 2015, Instagram wasn’t a core sales driver, with limited link sharing. Instead, partnerships with bloggers who had large lists of email subscribers became the strategy that led to early growth. As Salguero learned, many of these influential health bloggers wrote often in support of grass-fed beef, but they lacked a call to action – there was no place online for readers to then stock up. ButcherBox filled the void. Salguero:

These people commanded huge audiences, had very authentic approaches, and had vast amounts of trust and ethos with readers. Plus, the content was already there. ButcherBox was a natural fit within the conversation.

As a startup with no outside funding, ButcherBox couldn’t pay an up front, lump sum to partners. Instead, they deployed an affiliate revenue-sharing model where influencers would earn a cut of sales made using unique coupon codes. The approach turned into a powerful marketing machine that drove MRR for both parties.

DTC suffers from the misconception that you need to raise VC to be successful. This is a transactional approach wherein companies often end up throwing money at influencers rather than truly viewing them as partners. At ButcherBox, we decided to only partner with influencers who were truly aligned with our values and mission instead. That created partnerships that were truly valuable; there was buy-in from both parties.

In the early days, ButcherBox’s affiliate model operated so that partners were paid on a recurring per-box model, with a $20 commission per box sold.

When we started, affiliates made up about 50% of the marketing mix. This gave us time to drive sales, but also to experiment with other channels. As we’ve grown and expanded into other marketing channels, we’ve supplemented this channel to make up a smaller portion of the overall mix.

Today, ButcherBox’s affiliate program operates through ShareASale, offering different payment models depending on the partnership. While most of their affiliate partners are individuals, they do work with a few agencies and deal sites. Affiliates earn commissions for sales driven within a 30-day window based on tracking cookies and earnings are paid out once per month on a designated day. According to Salguero, ButcherBox has paid out more than $1,000,000 in affiliate commission revenue to its more than 3,000 US-based partners.

Landing notable influencer partnerships

The flywheel of influencer marketing took off for ButcherBox when they landed partnerships with notable figures in the Paleo nutrition space. Chris Kresser, author of The Paleo Cure, became an evangelist of the brand. Kresser’s fact-based blogging, large email list, and easy path to purchase made for a strong partnership, but Kresser’s validation and “seal of approval” put ButcherBox on the map. Having Kresser on board as a partner drove sales and helped reinforce trust, ethos and value in the ButcherBox product.

Popular nutrition coach Thomas DeLauer also came on board as a notable influencer partner. As social platforms became places for shopping discovery, DeLauer’s YouTube videos and social media content became a powerful referral engine for the company.

ButcherBox now has more than 600 influencer partners with audiences of varying sizes that reach well beyond the Paleo realm and help extend the company into adjacent spaces, like the diet and nutrition spaces of The Whole30 and Keto. Beyond marketing, these influencer partnerships have helped shape the trajectory of the company. A 2015 Kickstarter benefitted from word-of-mouth. More than 1,000 individuals pledged over $210,000, fully funding the campaign to launch the brand, validating the interest around quality grass-fed beef.

Adapting to the current influencer environment

According to eMarketer, there are now more than 500,000 active influencers on Instagram. Statista reports indicate affiliate marketing spending in the US is projected to reach $8.2 billion by 2022. Affiliate marketing accounts for around 16% of all online sales globally, while affiliate marketing platforms like Refersion saw more than $21 million in conversion revenue during BF/CM 2020. Worldwide, global affiliate marketing spending is growing at 27% CAGR. With 81% of brands now leveraging affiliate marketing and 38% of marketers using this tactic, competition to partner with the best creators is fierce.

At the same time, many influencers have begun pursuing their own branded product lines, prioritizing these lucrative ventures over affiliate relationships and revenue-sharing models. While ButcherBox now has the capital to pay influencers upfront, rather than via affiliate payouts, the brand’s strategy has evolved as well.

ButcherBox’s future-facing influencer marketing play

ButcherBox is currently shifting beyond the health and nutrition space to reach a wider market that includes chefs, fitness experts, and other types of influencers with health-adjacent interests.

While its products are still only available through the brand’s website, expansion through other physical and digital marketplaces is in the plans. The company is also leaning into owned marketing channels on platforms like YouTube, where they’re producing branded content and educational material around their products. CEO Mike Salguero on those plans:

In 2021 and beyond, we’re planning to become more of a brand rather than just a ‘meat in the mail’ company. We’re also looking for opportunities to expand into partnerships with restaurants and grocery stores to reach that next stage of growth.

The influencer marketing game has changed, but because they started five years ago, ButcherBox has the early advantage. “We’re glad to have been early to the trend and maximized the potential when it was still a fairly novel concept,” Salguero said. As ButcherBox leaps from digitally-native brand to enterprise retailer, the strategy has reflected as much. No longer is Salguero and team focused on the model that helped them arrive atop the 2PM DTC Power List. The soft spoken brand now has eight television ads in circulation, reaching millions of top of funnel customers who are well beyond the niche that brought them from relative obscurity to relied upon by hundreds of thousands of customers.

But the influencer model that brought them from zero to one remains an important chapter that new brands should emulate. In six short years, ButcherBox has become a household name by owning the meat drawers of countless discerning customers. Salguero expects growth to continue.

Research by Kaleigh Moore and Web Smith | Editor: Hilary Milnes | Art: Alex Remy

Editor’s Note: This Member Brief was unlocked by #Paid.